HM Revenue & Customs (HMRC) is owed a record £3 billion in outstanding VAT payments by UK businesses, it has emerged.
The news follows a study carried out by online finance marketplace Funding Options, which found that the amount of VAT outstanding from UK firms had increased by almost a quarter (22 per cent) in the year to March 2018.
Up from £2.48 billion in the previous period, the £3 billion figure represents a five-year high, the study’s authors said.
Meanwhile, the research found that overdue corporation tax bills had also increased by five per cent during the period studied, rising to £1.98 billion.
An analysis in Economia argued that the UK’s so-called late payments crisis was a “driving factor” behind the notable increase in businesses struggling to pay their VAT and corporation tax bills.
It pointed out that separate research recently carried out by the Federation of Small Businesses (FSB) had revealed that a shocking 84 per cent of small and medium-sized enterprises (SMEs) are now regularly paid late and left chasing unpaid invoices each month.
However, HMRC itself said that the value of outstanding VAT payments was more likely to have increased due to “an upward growth in [the number of] businesses registering for VAT.”
During last week’s Budget announcements, Chancellor Philip Hammond announced that the existing VAT threshold will remain at £85,000 until at least April 2022.
Most VAT-registered businesses earning above this amount will need to comply with HMRC’s new Making Tax Digital (MTD) for VAT project from 1 April 2019, which will require them to make a number of changes to the ways in which they store and submit VAT information.
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